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Walmart Tests Waymo for Grocery Delivery

By Rich Duprey – Aug 11, 2018 at 2:05PM

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But there's a big speed bump for driverless cars to get over.

Walmart (WMT 0.77%) is partnering with Alphabet's (GOOG 1.56%) (GOOGL 1.90%) driverless car company Waymo for grocery delivery, in a bid to crack the last-mile delivery code and keep pace with (AMZN 3.04%) and other supermarket chains.

But rather than bringing the groceries to you, a Waymo vehicle will pick you up at your house while your order is being put together, and drive you to the store to retrieve it before driving you back home. 

A Waymo car in a Walmart parking lot

Driverless cars, like this Waymo vehicle, may be the future for grocery delivery. Image source: Walmart.

Different modes, same goal

Last-mile delivery has been the crucial problem for the growth of online grocery shopping, which is expected to become a $100 billion industry by 2025. Walmart, however, has struggled with how best to get goods to the customer's door, largely preferring to promote its in-store pickup service for online shoppers.

Today, Walmart uses Deliv, Postmates, and DoorDash to deliver groceries. Highly-touted experiments with Uber and Lyft ended earlier this year. Meanwhile, a separate trial program in New Jersey and Arkansas had Walmart employees delivering packages after their shifts ended, but that also failed. A new experiment in Georgia is underway with a handful of employees dedicated to delivery using their own cars.

Rise of the machines

Whether the Waymo partnership will be any more successful than the other tests Walmart has run is doubtful. A study conducted by the American Automobile Association this past April found consumer distrust of autonomous vehicles is growing, with 73% of respondents saying they fear riding in a self-driving vehicle, a big jump from the 63% who felt that way last year.

It's not an unreasonable fear. A number of fatal crashes involving autonomous cars have fueled the impression that the technology is not yet ready. But Walmart's blog post announcing the grocery delivery service's launch says Waymo cars have "safely self-driven over 8 million miles on roads across 25 U.S. cities already." A Waymo car was involved in an accident in May, but it was reportedly not at fault.

From a safety perspective, driverless delivery seems no riskier than giving the key to your house or apartment to a human driver. Amazon is experimenting with this in its Amazon Key program, where delivery people can get one-time access to your home to deliver packages.

Amazon has just as steep an uphill climb as Walmart has with the Waymo idea: A large majority of consumers have said in surveys that they are suspicious of letting a stranger into their house alone. (Amazon is also trying to get into your car with package delivery to your trunk). In the meantime, Amazon has expanded Prime Now same-day grocery delivery from Whole Foods stores into two dozen major metropolitan markets.

A third direction

Grocery delivery is harder than delivering other items because of the need to keep perishables from spoiling. The benefit of online grocery shopping is the convenience. Driving to the store (or being driven there) to pick up items ordered online may be easier than doing the shopping yourself, but it is still less convenient than having food delivered to your door. This may mean Kroger (KR 1.33%) has the best idea.

The supermarket giant partnered in June with robotics and AI specialist Nuro to have self-driving cars deliver grocery orders to customers' homes. A customer who places an order will be given an access code to open the doors of the delivery vehicle when it arrives.

Kroger is testing curbside delivery by autonomous vehicles as a means to expand delivery into markets where it isn't offered currently. Kroger already offers more traditional delivery services to about 75% of its customers. It also just launched Kroger Ship, which gives shoppers a selection of 4,500 Kroger-branded grocery products as well as over 50,000 other items, which are delivered for free by a package carrier.

Key takeaway

Grocers are rushing to integrate technology into their delivery operations, but maybe the analog option remains best for now. When grocery delivery pioneers like Peapod started, your order was picked, packed, and delivered to your door in a relatively safe, secure manner. Self-driving cars may become commonplace, but consumers seem to prefer keeping it simple. And that could ultimately be the best way for Walmart to handle the competitive pressures of the grocery wars.

John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Suzanne Frey, an executive at Alphabet, is a member of The Motley Fool's board of directors. Rich Duprey has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Alphabet (A shares), Alphabet (C shares), and Amazon. The Motley Fool has a disclosure policy.

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